ACFN - Earnings call transcript Q2 2019

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Operator

Good day, everyone, and thank you for holding. Welcome to the Acorn Energy's Second Quarter 2019 Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Tracy Clifford, CFO. Please go ahead..

Tracy Clifford

everyone conference welcome and you, to call. today's Thank

to the in to today's a are questions reminder, remarks made of many subject statements These response As prepared uncertainties. statements or be forward-looking. risks various and may your in

in and to growing in For subject strategy, the as company years such maintaining competitive its its operating as changes risks the high performance in example, for financial changes access and of rates, and growth. customer financial XXXX base, economic technology, as the well future executing to renewal operating factors, capital is environment, sufficient associated with risks, having

Forward-looking statements XXXX, will Private be Reform that growth Act to assumptions available management OmniMetrix as are pursuant are their goals, Acorn in of to or future XXXX. Securities well Litigation There in harbor based no the management's as the assurances able using of currently beliefs, made achieve years. information safe nor to on provisions

undertakes with risks disclose after the obligation also affect Exchange XX-K Factors circumstances A discussion full on in The to made. included uncertainties and filed or Acorn's to the that is of any forward-looking to as the may events date the company Risk no Securities and statements reflect company Commission. Form revision

hand that, With I'll CEO Walter? Czarnecki, the of to OmniMetrix. Walter the call over

Walter Czarnecki

Thank you, Tracy, and thank you to call. everyone for joining today’s

of Revenue the an basis cash profit. million, quarter quarter achieved GAAPs increase X% continued OmniMetrix million operating and the for revenue on XXXX XXXX. pleased gross second were are basis second that improved margins report over $X.XXX $X.XXX of We and during to the an was growth, sales a recognized quarter

filed most sales measure focus each GAAP, the service we over one know, contract's business. service of recognize of company on hardware the in of track years contracts you financial to the is to performance three for sales We our that growth believe given of years on cash to the many statements basis three from typically our contracts hardware depending this reflective pursuant revenue term. for we and and As

sales the prior year cash generation at grew level. continued power remain a growth by division that basis Our on period we of confident and XX% over

by Our on attribute new and believe sales smaller cathodic weeks, division. several loss will In we basis we the to growth people back declined cathodic with division we multiple which historical have of our in a which XX%, line in rates. cash sales sales that protection bring protection sales recent hires, projected made

year. to XX% the Our prior XX% gross the margin from in increased quarter of same

our this a the improvement quarter's industrial call, As we to new, the markets products primarily discussed during result is deliver margin innovative earnings and IoT previous of strategy hardware serve. to software

install compressor that customer the As experience. part positive are confirms to excellent of over an market meeting we and our our delivering on feedback AIRGuard HeroX and monitor's ship more Monitor's strategy, received the Rectifier industrial the IoT we customer emerging continue and air needs products, of We've course. both of and further exceeding which

not only a Regarding must continue broadly, requires for trend that industrial it is them. a more recognize we adoption see market be companies technology IoT that priority IoT awareness, their to of key

their to For IoT customers, on and for industrial into and one our his do with a XXXX top example, I me I priorities owner regular one business. is three month OmniMetrix last as the integrate products met basis of related of company's that to

in adoption to continue We see years. quarters the expect and this coming

that that I annual at and on market. it, in technology Texas the over about our Business is we are IoT speaking more showcase shaping attracts on the will This join X, XXXX. X,XXX X position Dallas, Summit hear AT&T leadership us and leaders. November please IoT To how through of AT&T's growth event in be the

question-and-answer section. the I'm further happy to discuss in topics these

the subject. more blog For Navigate shift deploy this click the of or where why written more the to I section the www.omnimetrix.net/blog are to I section interested the on we top on of from page, Omni colleagues have awareness in screen. visit website, anyone encourage at home blog about you to learning IoT, OmniMetrix and well-positioned the my IoT and the

call I’d our to over highlights. to Now, like turn CFO, Clifford the Tracy to financial review

Tracy Clifford

Thank you, Walter.

been XXXX, aware As you in are subsidiary. February has OmniMetrix Acorn’s only

was XXXX. XXX% quarter revenue in of Acorn's by second of OmniMetrix So the generated

million, XX% to revenue which in pleased revenue pipeline protection grew segment increase X%. cathodic power in driven in disappointingly share We’re the $X.X a our revenue was offset XXXX generation XX% that our segment and a or of decline OmniMetrix to by by

to current segment for both protection the of by due Likewise, year revenue our aggregate XXX% growth first sales power generation was offset than XX% half period. to as This X% in the of grew XXXX, XX% decline team in cathodic in segment. the XQ and mentioned, timing the large staffed XXXX decline compared less to the Walter during XXXX two being to orders XQ a

Higher industrial in the margin revenue of services the XXXX, increase to sales a monitoring number of as increased was revenue year The was revenue being compared by driven increase revenue focus from resulting and monitoring monitored significant flat units XX% while initiative on monitoring commercial in XQ result hardware markets. period. grew the prior in

overall sales significantly increased compared of provides as revenue a XXXX hardware months gross the XQ more to hardware product XX% the on attributable XXXX margin and increased The to rate and mix higher profit revenue, XXX,XXX growth. a six first versus increase monitoring favorable margin in grew profit sales of were Gross gross exceeding in to sales.

XXXX XX% XXXX. gross mentioned, XQ result, margin versus a to As as XQ improved in in XX% Walter

to were XQ engineering some OmniMetrix to and customer infrastructure XXXX in XXX,XXX XXX,XXX primarily our in due innovation. strengthen investments for service additional compared continued at competitive and personnel spend XQ IoT higher X% XXXX, to R&D of expenses and Operating

first When operating the was quarter the the of quarter operating costs in comparing slightly second to quarter. XXXX, from costs down second

our future our and invest we IT the in we expansion system. of costs in the expect team that will operating We and have in increased sales

significantly in the In profit and OmniMetrix its expected, in over profit first growing loss loss XQ XXXX half from an gross to faster of $XX,XXX XXXX. reduced than of XQ operating XXX,XXX in half the XQ operating reported of XXXX, by XX% of revenue OmniMetrix versus a XXXX. With $XX,XXX XX,XXX

reduced period. personnel cost corporate reflecting company With results, Acorn’s to nearly including second G&A by the XXXX, a to XXX,XXX consolidated reductions its other Acorn prior in cost of and XX% respect in fees material the year reduction public costs over for quarter

shareholders As OmniMetrix per corporate attributable share loss loss in a X% of to XXX,XXX or per Acorn’s XQ in consolidated XXX,XXX compared XXXX. XXX,XXX or Acorn's XXXX XX% growth, Net to XQ XXX,XXX in to to and overhead, lower XXXX decreased in XXXX. XQ operating compared share result $X.XX improved to XQ

attributable XXXX. shareholders to versus was For half XXX,XXX half X.X per or per $X.XX first share first net $X.XX of or the the loss of share million Acorn's XXXX, in

of per loss or Acorn's $X.XX XXX,XXX a and on interest remaining half did include sale of a First share of XXXX DSIT.

As it basis, consolidated relates flow to a cash on our

the Acorn to related of XXX,XXX half the operating used X.X activities related million versus used XXX,XXX corporate XXXX that year, operation during used of of expenses. XX,XXX first cash this XXX,XXX OmniMetrix half XXXX. and in in to Of first

manage March interest in in minimum put line recall to balance a more the of terms, first with may requirement. allows in We charges pay of favorable OmniMetrix conference average you $XXX,XXX, a amount this cash required we from call, accounts outstanding. service which new flexibility year place our As regardless on quarter monthly to receivable greater of

being approximately equivalents XXX,XXX At had of at XX, of June held outstanding line cash XX, credit XXX,XXX, XXXX, cash in currently Acorn June had to borrow. XXX,XXX bank and restricted the of excluding Israel, XXXX. and X.X OmniMetrix on cash was is a available which as million

stake, X, cash equivalents again had cash XX% excluding of to affect getting restricted XXX,XXX repurchase As of of approximately $X.XXX August and the the after of the cash. Acorn OmniMetrix million,

Jan I’ll includes That the and Loeb, now results call review the Acorn Jan? of pass to CEO. my over

Jan Loeb

Thank you, Tracy.

gross mentioned I us $X.X had end close that filed for price repurchase dividends before on we original pursue. of beneficial very for will not not we is XXXX were we We of to which allow deal call in did last the million rights I our We and which that the accrued to growth plus were transaction the accomplished OmniMetrix excited able of the based our shareholders. proceeds, already own. offering feel the do a raising at that quarter but additional also funding XX% On about Acorn this only this that

an an operating from is being profit benefit QX, that provides to OmniMetrix QX capital growing and XXXX. And been our for additional the growth in has business loss remaining transitioned successfully constrained in operating an capital funds despite which

first half expect on the we be in below going to half at We XXXX. topline average is some there forward been December Obviously, focus attainable an driving second be We goal that XX% do will in growth quarter. believe that the level particularly the and stronger OmniMetrix to variation. have growth for company the of recognizing will of continue

We the implementing also believe an begin QX. initiatives that some we are of to have by impact will now

that our in marketing invest We expanding sales continuing next-generation goals some and and are mentioned undertaking innovation. our of initiatives growth including to these support have to we efforts, product

and do do sales both end, this measured to expanding we To of product not in we efforts our our intend intend segments. to make - investments make

our sales expenses not both level, the Beyond our at company continue we and the our to efforts, will inhibiting manage expand at plans parent operating to prudently while growth.

in have consolidated the our net As year while reduced grow by company. continuing you QX can past the we in loss XX% to results, see our

model, We building shareholder a recurring high bottom-line revenue OmniMetrix value. feel top lever is excellent strongly such opportunity provides margins business for for a value. building strong that an growth, The and improvement with and continued

also that opportunities We any will value consider accretive. opportunistic M&A maybe

July of For we purchasing which on pricing, XXXX at XX% X. example, OmniMetrix the commenced

transaction like to from benefits own all we of in and sense of growth. It losses is transitioning this to operating to it operating and to now own more it particularly business profits. feel prefer We shareholders' also that OmniMetrix its makes invest this

investors. back I would turn we that, questions the take call the from can so operator to With

Operator

would turn [Operator any are concludes I questions Instructions] Jan the to queue. like for over question-and-answer to There Loeb This our back conference session. in no closing… the

queue we have go Excuse in one have Oppenheimer. ahead. we question the me from - Zook Please - Michael a

Michael Zook

to the regard efforts my going build business. memory forward the Just to refresh with to

supplier? I come on Our systems OEM new building product our into the product say guess the in I we systems lines or creation of mainly existing new of focused and systems do lines wouldn’t retrofitting

Jan Loeb

why please? take don’t you that Walter question

Walter Czarnecki

is on Michael, good In construction we of focus our as both retrofit. both Sure, opportunities, as new well this morning divisions Walter.

newly look division, the on market, as pipelines, So power similarly And we Protection in as well well builds. at installing are installing gas Cathodic we’re generation if on existing monitoring pipeline installed generators, as our as new you models. older

Michael Zook

the little or XX/XX like of us it is or? a Can you give XX/XX bit two breakdown a between

Walter Czarnecki

base of is those it markets of majority such The large of installed equipment. because of both existing existing have a just

retrofit. newbuild is to there we as focus well. plenty So on out there the being That said,

Michael Zook

are the projects? then And of regard from regulatory these to side, regulations with the monitoring there types of increasing

Walter Czarnecki

on we sides Similarly, business. both the regulations of increased are seeing

we are we've So times nursing other on years healthcare seeing losing more during homes with power seen weather various couple critical other facilities it regulations as and generation, events. past over power the and and And healthcare at relates as hospitals of facilities. hurricanes to

multiple We’ve reporting on those active and we're in have backup tiers of power role seen increased an playing doing requirements that. ready facilities to

and they customers reporting to offering on those as revenue by required reports service reporting our that put that requirements met it. currently facilities the and in for side are fact have receiving forth law because Specifically these a various to we’re

in Protection drivers place of inspections been Cathodic regulations to-date, require side, one for been everything key the the business along the that that the hearing. there we're On has that and have pipelines various

our had hearing of one about regulations fact, with just place a expecting In months we’re colleagues about I debt, in years ahead. yesterday the to this be more and in conversation

a remains the key both that divisions for business. So of driver

Michael Zook

of the you explanations. appreciate and It's helpful going I And opportunities basics very understand thank forward. Well, the these it. to for business our

Operator

any turn [Operator like Therefore, remarks. Instructions] other questions the Jan queue. Loeb back would no are I closing to for conference in There the to over

Jan Loeb

with always with our conclude call. concerns I'm company me for Relations team direction. everyone reach or Acorn. appreciate Operator, about our in Thank We questions to for Once thank thank speak that strategic who with or time your out to you today. any of the genuinely should have questions investors Please support again set our a call investors today's again to and the happy your I or Investor and you. up interest

Operator

presentation. is conference The attending you Thank concluded. now today’s for

and disconnect, of the now may rest You you enjoy I day. hope your

Acorn Energy (ACFN) 15 Aug 192019 Q2 Earnings call transcript